Top Analyst Bullish on Electronic Arts (EA) as Apex Legends’ Performance Propels Stock Higher


Shares of video game-maker Electronic Arts (EA) surged Friday as investors bought the stock over news its new free-to-play game is attracting millions of players. The new game — dubbed “Apex Legends” — has been played by more than 10 million people, as EA looks to take back gamers lost to the Fortnite phenomenon. The announcement helps the stock recover from a drop following bad earnings.

Baird analyst Colin Sebastian sees this as good news for EA in the long run, and is maintaining his Outperform rating and $90 price target on the stock.

Just like how pre-revenue social networks (Facebook, Twitter, Snapchat) were judged on usership, the same is true for new-wave gaming. Since EA allows users to play online game “Apex Legends” for free, most analysts are more concerned with the number of players playing, as revenue will come through in-game purchasing over time. So when EA announced that 10 million people played its new game, Sebastian took notice. He said that EA displayed “faster initial growth than Fortnite, Pokemon Go, Clash Royale, Candy Crush or Angry Birds.” He continues, saying “it took Pokemon Go seven days to reach 10 million users and top battle royale title “Fortnite” roughly two weeks to hit 10 million active players, en route to over 200 million registered accounts at the end of 2018.”

Another strong signal for Sebastian is that “Apex Legends is also now a top performing title on streaming site Twitch…reaching nearly 500,000 peak viewers (second highest peak of February 2019, behind Fortnite with 671,000), and is currently the most viewed category on Twitch.” Twitch is vitally important for video games, as it creates an entirely new gamer experience for players and non-players alike, while also increasing the brand image of that particular brand. Adding to the importance of Twitch is well-knowing streaming personalities, which Sebastian says will help contribute to growth, as “streaming engagement will likely serve as an ongoing catalyst for player base expansion.”

Sebastian is extremely pleased with EA’s results, but notes “we would need a longer period of sustained momentum in order to make any changes to our financial expectations for EA, which currently embed a very modest contribution to Apex.” While off to a great start, EA needs to keep up the pace while also ensuring it generates revenue from the popular game.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Colin Sebastian has a yearly average return of 21.4% and a 68% success rate. Sebastian has an average gain of 8.3% when rating EA and is ranked #32 out of 5,141 analysts.

Investors are excited about EA. TipRanks analysis of 24 analysts shows a consensus Strong Buy rating on the stock, with 18 recommending Buy and six saying Hold. There 12-month price target average is $93.75, though this represents a 4% decrease from current levels after Friday’s surge. (See EA’s price targets and analyst ratings on TipRanks)